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Investment guide

Getting your finances fit for retirement

Is a pension an investment?

…and other questions answered to help get your money in a good place for when you’re older.

Yes, yes, we know! The words ‘pension’ and ‘retirement’ are unlikely to fill you with excitement. But your pension could be crucial to living your best life when you stop working – and that can definitely be exciting.

So here’s a quick – very quick, we promise – guide to a personal pension and what it could mean for you.

Quick guide to pensions

What is a pension?

A long-term savings scheme to help grow your money for later in life. You can take benefits from your pension any time after you turn 55 (which is changing to 57 in 2028). While many see them as a way to fund retirement, you don’t actually have to be retired to access your pension.

What are the benefits?

A personal pension is, quite simply, one of the most tax-efficient ways to put money away for your future. The government wants us all to save for tomorrow so we have what we need as we get older, so they provide generous tax relief on your pension contributions. 

Are there different types of pension?

Yes. As well as the personal pension we’re talking about here, which is basically one you sort out for yourself, others include:

Workplace pension

The scheme an organisation’s employees are automatically enrolled in at work. A percentage of your pay goes into the scheme each payday, and your employer usually contributes too. 

Defined benefit pension

Another type of workplace pension, sometimes called a ‘final salary’ pension. This one pays an income when you retire based on your salary and how long you worked for the business, instead of the amount you contribute.

State pension

Regular income from the government once you reach State Pension age. That age varies, but you can check when you’d be eligible online.

Is a pension an investment?

Yes. The money is normally invested so it has the chance to grow over time, potentially giving you a nice little nest egg when you need it.

Like all types of investment, the more you put in and the longer you leave it, the more it could grow. But it’s also possible you’ll get less back than you put in because the value of investments can fall as well as rise.

So where are pensions invested?

Stocks, bonds, real estate, other assets – pension providers invest in various mixes of all of them. It depends on the pension scheme and level of risk you choose for the chance of greater reward. 

Looking to invest your money?

Royal Bank Invest is a quick and simple way to help get your money working for a brighter and wealthier future – through an ISA, general investment or pension. Investment values can fall and rise, your capital is at risk. Eligibility criteria, fees and charges apply.

How much will I need when I retire?

That’s entirely up to you, your lifestyle and your plans for the future. It’s worth thinking through what you might need to live on later in life.

You should factor in the potential for bigger household bills and increased health care, but you potentially won’t have to worry about daily travel costs and mortgage payments. The fun bit is that you can also think about the holidays and hobbies you might have more time for.

Once you’ve looked through all that, it could be worth checking how much is in the pensions you currently have and asking yourself – is it enough?

Planning for retirement

It’s never too early to start planning for your retirement. With so many pension options to consider it's no wonder many of us don't like thinking about how we'll pay for our retirement.

Where do I begin?

You may well already have a workplace pension up and running, so it’s worth checking your contributions there and seeing if you should start adding more. You can also set up a pension pretty easily online. And obviously, the sooner you start, the more you could have when you need it.

Learn more about investments

Whether you’re an experienced investor or just finding out what investing is, we’ve got a range of articles to help you understand more about investing.

We regularly update our articles depending on what’s happening in the market so check back for future updates.

Something else we can help you with?